Cross-Border Labor Law and Global Mobility Issues

• Author: David A. Steiger
• Pages: 239-303

If we accept the well-established proposition that intellectual property (IP)

has become one of the most important assets of 21st-century companies,

then we probably have to pay at least some heed to the corresponding,

oft-related notion that the people who generate and apply the IP to daily

business are a critical part of, if not the key to, success. Michael Milken,

chairman of the Milken Institute, has declared, “any analysis of capital

structure should recognize that most balance sheets are dramatically inac-

curate because (with the exception of professional sports franchises) they

fail to include the value of human capital.”1

Milken illustrates just how much more true this is today than ever by

pointing out that in the 1920s, 60 percent of the cost of producing the high-

end technology of the time, such as automobiles, was in raw materials and

energy, compared to less than 2 percent of the cost of producing computer

chips today.2 It is not very surprising then that Darren Gardner, a partner

with Seyfarth Shaw, relates that employment issues have gone from being

a “dirty afterthought” to assuming an upfront position in many interna-

tional deals—particularly in the tech sector. “Unless you are acquiring a

company for licenses or physical assets it holds,” Gardner concludes, “the

biggest asset of companies now is its employees.”

1. Human Capital, Q  M M, http:// www .mikemilken .com /quotes .taf (last

visited May 28, 2012).

2. Id.

239

Chapter 9

Cross-Border Labor Law

and Global Mobility Issues

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Unfortunately, executives and counsel used to dealing with human

resources (HR) issues solely from a U.S. legal perspective are in for a rude

awakening when they venture overseas. It is likely that wherever else you

want to do business, regulations will exist that you must take into consid-

eration before you begin, lest you inherit unexpected costs and obligations

that could change a prot-making operation into a vortex of losses and

legal uncertainty.

The Challenges of “International Labor Law”

Because employment disputes represent one of the primary risks facing a

company operating across borders, it is critical to understand how to oper-

ate within what legal authority that has been built up.

3

For the uninitiated,

let’s start with a basic point of reference: almost no U.S. employment law

applies in an international context.4 Some of the few exceptions are certain

federal antidiscrimination in employment laws, which apply only where

U.S. citizens are employed abroad by non-U.S. entities that are nonetheless

“controlled” by a U.S. company.5

It is also important to understand as an initial matter that no formal

international labor law system is in place.6 What does exist is really an

informal regulatory system, comprised of international treaties and conven-

tions, International Labor Organization (ILO) standards, voluntary codes of

conduct, nongovernmental organizations’ (NGOs) guidelines, and domes-

tic enforcement mechanisms, among others.7 On the ground, labor laws

and regulations vary greatly between jurisdictions, often with substantial

3. Jennifer L. Hagerman, Navigating the Waters of International Employment Law: Dispute

Avoidance Tactics for United States-Based Multinational Corporations, 41 V U. L.

R. 898 (Winter 2007), available at http:// scholar .valpo .edu /cgi /viewcontent .cgi ?article=1177

&context=vulr.

4. Id. at 864.

5. “Going Global”: An Overview of International Employment Issues, B  MK,

3 (2010), http:// www .bakermckenzie .com /les /Uploads /Documents /Going %20Global %20 -

%20An %20Overview %20of %20Int ’l %20Employment %20Issues %20 (2010 ) .pdf.

6. Hagerman, supra note 3, at 860.

7. Id. at 860–62.

CHAPTER 9240

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differences in application and penalties for violation.8 To complicate mat-

ters further, regional differences can also exist within the borders of a given

nation or state.9

The cacophony of the often-inconsistent demands of the various stake-

holders can be very confusing to U.S.-based executives who are used to the

law generally speaking with “one voice.”

10

Still, Gardner holds that there

is no place around the globe that he would not do business solely because

of labor and employment issues. A logical starting point in getting one’s

arms around this area of law is the ILO core labor standards.11 As it hap-

pens, in a number of jurisdictions, ratied international treaties are applied

automatically at the national level.12

Gardner reckons that he has personally dealt with the employment laws

of over 120 different countries. While he admits that the United States has

a complex enforcement system and large potential liability for employers,

he points out that the relatively laissez-faire, at-will environment preva-

lent in the United States simply doesn’t exist anywhere else. What is more,

most foreign jurisdictions will not honor a “choice of law” provision in

an employment contract where the employer’s desired terms and condi-

tions differ signicantly from local employment laws and regulations.13

An employer in China must generally conclude a written employment con-

tract with its full-time employees no later than 13 months after hire, or the

employer must pay double wages to the employee for every month that it

has failed to sign a contract.14 Further, current Chinese employment law

makes short-term (e.g., yearly) employment contracts less advantageous

8. Stephen J. Hirschfeld & Ginger D. Schroeder, Global Employment Law Compliance, N.Y.

L.J. (Sept. 14, 2009), http:// www .chklawyers .com /images /ps _attachment /attachment46 .pdf.

9. Id.

10. Hagerman, supra note 3, at 899, http:// scholar .valpo .edu /cgi /viewcontent .cgi ?article=1177

&context=vulr.

11. Id. at 900.

12. How International Labour Standards Are Used, I’ L O. (2012), http:// ilo .org /

global /standards /introduction -to -international -labour -standards /international -labour -standards

-use /lang - -en /index .htm.

13. Hirschfeld & Schroeder, supra note 8.

14. The 2011 Global Employer: Highlights of Littler’s Fourth Annual Global Employer

Institute, L M, P.C., 50 (Feb. 2012), http:// www .littler .com /les /press /pdf /

TheLittlerReportThe2011GlobalEmployerHighlightsofLittlersFourthAnnualGlobalEmploy

erInstitute .pdf.

241CROSS-BORDER LABOR LAW AND GLOBAL MOBILITY ISSUES

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